Retirement Blog

Idea for saving Social Security

As Congress struggles with ways to manage the rising cost of Social Security without cutting payments that are vital to millions, some people are offering suggestions that sound like they might be worth a second look.

Try this on for size: Would you delay claiming Social Security -- saving the federal government money in the process -- if it meant Uncle Sam would give you a cash bonus? The bonus would be equal to the amount that your Social Security payment would increase by delayed claiming -- about 8 percent of your potential payment for every year you delay.

Economic theorists at the University of Pennsylvania Wharton School of Business, who came up with this idea, calculated that workers given the chance to receive their delayed retirement credit as a lump-sum payment would, on average, delay their retirement for a year and a half to two years. This raises the probability that people younger than 60 would work beyond the normal retirement age from 29 percent to 86 percent, and it ups the likelihood 60-year-olds would work beyond 65 from 4 percent to 49 percent.

The report says this plan is a good deal for Social Security because it continues to collect wage taxes and can delay paying a participant's benefit for however many additional years he chooses to work. It is a good retirement planning deal for recipients because it front-loads payments during the early years of retirement when most people need more money. Participants also could invest this lump sum and potentially build a bigger nest egg for their later years or leave it to their heirs.

What do you think? Would you vote for making a partial lump-sum payment a Social Security option?

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301 Comments

william connelly

February 12, 2013 at 8:46 am

A very conservative estimate not accounting for overtime, some part time and other taxable income of ss tax paid to my account
invested at 6%(prime rate was from 6 to 21.5 % during my working
years) I would have to live beyond average age to break even.
I paid a lot less into a pension fund,get a larger pension than ss and according to thier information, they are making money on the trust, not going broke. Saving ss should be a secondary problem for government, primary should be saving themselves from being held accountable for squandering the money.

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